AUDIT REPORT

Audit of NRC's Implementation of 10 CFR Part 21, 

Reporting of Defects and Noncompliance

OIG-11-A-08 March 23, 2011

All publicly available OIG reports (including this report) are accessible through

NRC’s Web site at: 

http:/www.nrc.gov/reading-rm/doc-collections/insp-gen/
UNITED STATES

NUCLEAR REGULATORY COMMISSION

WASHINGTON, D.C. 20555-0001

OFFICE OF THE

INSPECTOR GENERAL

March 23, 2011

MEMORANDUM TO: R. William Borchardt

Executive Director for Operations

FROM: Stephen D. Dingbaum /RA/

Assistant Inspector General for Audits

SUBJECT: AUDIT OF NRC'S IMPLEMENTATION OF 10 CFR PART 

21, REPORTING OF DEFECTS AND NONCOMPLIANCE

(OIG-11-A-08)

Attached is the Office of the Inspector General’s (OIG) audit report titled, Audit of NRC’s 

Implementation of 10 CFR Part 21, Reporting of Defects and Noncompliance.

The report presents the results of the subject audit. OIG discussed the audit results and 

informal agency comments with agency management and staff during an exit 

conference on February 1, 2011, and during a meeting on February 23, 2011. OIG 

incorporated the agency’s informal comments into this final report as appropriate. NRC 

management stated that the report will be helpful in adding clarity in the associated 

regulatory area and opted not to provide formal comments. 

Please provide information on actions taken or planned on each of the 

recommendations within 30 days of the date of this memorandum. Actions taken or 

planned are subject to OIG followup as stated in Management Directive 6.1.

We appreciate the cooperation extended to us by members of your staff during the 

audit. If you have any questions or comments about our report, please contact me at 

415-5915 or R.K. Wild, Team Leader, Nuclear Reactor Safety Team, at 415-5948.

Attachment: As stated 
Electronic Distribution

Edwin M. Hackett, Executive Director, Advisory Committee 

 on Reactor Safeguards

E. Roy Hawkens, Chief Administrative Judge, Atomic Safety 

 and Licensing Board Panel

Stephen G. Burns, General Counsel

Brooke D. Poole, Director, Office of Commission Appellate Adjudication

James E. Dyer, Chief Financial Officer

Margaret M. Doane, Director, Office of International Programs

Rebecca L. Schmidt, Director, Office of Congressional Affairs

Eliot B. Brenner, Director, Office of Public Affairs

Annette Vietti-Cook, Secretary of the Commission

R. William Borchardt, Executive Director for Operations

Michael F. Weber, Deputy Executive Director for Materials, Waste,

 Research, State, Tribal, and Compliance Programs, OEDO

Darren B. Ash, Deputy Executive Director 

 for Corporate Management, OEDO

Martin J. Virgilio, Deputy Executive Director for Reactor

 and Preparedness Programs, OEDO

Mary C. Muessle, Assistant for Operations, OEDO

Kathryn O. Greene, Director, Office of Administration

Patrick D. Howard, Director, Computer Security Office

Roy P. Zimmerman, Director, Office of Enforcement

Charles L. Miller, Director, Office of Federal and State Materials

 and Environmental Management Programs

Cheryl L. McCrary, Director, Office of Investigations

Thomas M. Boyce, Director, Office of Information Services

Miriam L. Cohen, Director, Office of Human Resources

Michael R. Johnson, Director, Office of New Reactors

Catherine Haney, Director, Office of Nuclear Material Safety

 and Safeguards

Eric J. Leeds, Director, Office of Nuclear Reactor Regulation

Brian W. Sheron, Director, Office of Nuclear Regulatory Research

Corenthis B. Kelley, Director, Office of Small Business and Civil Rights

James T. Wiggins, Director, Office of Nuclear Security

 and Incident Response

William M. Dean, Acting Regional Administrator, Region I

Victor M. McCree, Regional Administrator, Region II

Mark A. Satorius, Regional Administrator, Region III

Elmo E. Collins, Jr., Regional Administrator, Region IV
Audit of NRC’s Implementation of 10 CFR Part 21, Reporting of Defects and Noncompliance

i

EXECUTIVE SUMMARY

The Nuclear Regulatory Commission (NRC) endeavors to protect the 

public health and safety and the environment through the regulation of the 

104 operating nuclear power plants in the United States. The Energy 

Reorganization Act of 1974, as Amended, Section 206, Noncompliance1

provides the statutory basis for NRC guidance and regulations that pertain 

to reporting component defects2in operating reactors. Specifically, 

Section 206 requires licensees that operate nuclear power plants to notify 

NRC of defects in basic components3that could cause a substantial safety 

hazard.

4

NRC uses Title 10, Code of Federal Regulations, Part 21, Reporting 

of Defects and Noncompliance (Part 21) to implement the provisions 

of Section 206. The primary NRC office responsible for Part 21 

implementation among licensees with operating plants is the Office 

of Nuclear Reactor Regulation.

The purpose of this audit was to determine if NRC's implementation of 

Federal regulations requiring reactor licensees to report defects contained 

in installed equipment is meeting the intent of the Energy Reorganization 

Act of 1974, as Amended, Section 206, Noncompliance.

 

1

 For the purposes of this report, Energy Reorganization Act of 1974, as Amended, Section 206, Noncompliance is 

referred to as Section 206.

2

 A defect is a deviation in a basic component delivered to a purchaser for use in operating nuclear power plants if, 

on the basis of an evaluation, the deviation could create a substantial safety hazard.

3

 A basic component is a structure, system, or component that assures the integrity of the reactor coolant pressure 

boundary; the capability to shut down the reactor and maintain it in a safe shutdown condition; or the capability to 

prevent or mitigate the consequences of accidents. It is, essentially, a safety-related component.

4 A substantial safety hazard is the loss of safety function to the extent that there is a major reduction in the degree of 

protection provided to public health and safety. Safety functions are necessary to assure the integrity of the reactor 

coolant pressure boundary, the capability to shut down the reactor and maintain it in a safe shutdown condition, or 

the capability to prevent or mitigate the consequences of accidents that could result in certain potential offsite 

exposures.
Audit of NRC’s Implementation of 10 CFR Part 21, Reporting of Defects and Noncompliance

ii

NRC staff has initiated action to better align NRC's defect reporting 

guidance with Section 206 of the Energy Reorganization Act. However, 

NRC will need to take further action so that NRC’s implementation of Part 

21 fully meets the intent of Section 206.

Despite Section 206 requirements for licensees that operate nuclear 

power plants to notify NRC of defects in basic components that could 

cause a substantial safety hazard, NRC staff have noted Part 21 reporting 

issues, and Office of the Inspector General (OIG) analysis of industry data 

indicate that there are apparent unreported Part 21 defects. These 

reporting issues exist because NRC regulations and guidance for 

implementing Section 206 are contradictory and unclear, and the NRC 

Baseline Inspection Program does not include requirements to inspect 

licensee reporting of Part 21 defects. Unless NRC takes action to fully 

implement Section 206, the margin of safety for operating reactors could 

be reduced.

This report makes five recommendations to improve NRC’s 

implementation of Part 21. A list of these recommendations appears on 

pages 12-13 of this report.

AGENCY COMMENTS

On January 19, 2011, OIG issued the discussion draft of this report to the 

Executive Director for Operations. OIG subsequently met with NRC 

management officials and staff during a February 1, 2011, exit conference 

at which time the agency requested additional time in order to provide 

informal comments. OIG met with agency management and staff on 

February 23, 2011, to discuss these comments; afterward, OIG 

incorporated the informal comments into the draft report as appropriate. 

NRC management and staff reviewed the revised draft OIG report, found 

that the report will be helpful in adding clarity in the associated regulatory 

area, and opted not to provide formal comments.
Audit of NRC’s Implementation of 10 CFR Part 21, Reporting of Defects and Noncompliance

iii

ABBREVIATIONS AND ACRONYMS

CFR Code of Federal Regulations

EQVB Division of Engineering, Quality and Vendor Branch

IP Inspection Procedure

LER Licensee Event Report

NRC Nuclear Regulatory Commission

NRR Office of Nuclear Reactor Regulation

OIG Office of the Inspector General
Audit of NRC’s Implementation of 10 CFR Part 21, Reporting of Defects and Noncompliance

iv

TABLE OF CONTENTS 

EXECUTIVE SUMMARY....................................................................................... i

ABBREVIATIONS AND ACRONYMS ..................................................................iii

I. BACKGROUND ........................................................................................ 1

II. PURPOSE ................................................................................................ 4

III. FINDING ................................................................................................... 5

DESPITE REPORTING REQUIREMENTS, THERE ARE 

UNREPORTED PART 21 DEFECTS............................................................. 5

IV. AGENCY COMMENTS............................................................................ 14

APPENDIX 

SCOPE AND METHODOLOGY .............................................................. 15
Audit of NRC’s Implementation of 10 CFR Part 21, Reporting of Defects and Noncompliance

1

I. BACKGROUND 

The Nuclear Regulatory Commission (NRC) endeavors to protect the 

public health and safety and the environment through the regulation of the 

104 operating nuclear power plants in the United States. The Energy 

Reorganization Act of 1974, as Amended, Section 206, Noncompliance5

provides the statutory basis for NRC guidance and regulations that pertain 

to reporting component defects6in operating reactors. Specifically, 

Section 206:

Requires licensees that operate nuclear power plants to notify NRC of 

defects in basic components7that could cause a substantial safety 

hazard.

8

Requires NRC to define, by regulation, defects which could create a 

substantial safety hazard.

Identifies the civil penalties that are to be imposed for noncompliance

and posting requirements at licensees’ facilities, and authorizes 

inspections and other enforcement activities needed to ensure 

compliance with the provisions.

NRC Component Defect Reporting Regulation 

Title 10, Code of Federal Regulations (CFR), Part 21, Reporting of 

Defects and Noncompliance (Part 21) implements the provisions of 

Section 206. Part 21 requires that licensees inform NRC if they obtain 

 

5

 For the purposes of this report, Energy Reorganization Act of 1974, as Amended, Section 206, Noncompliance is 

referred to as Section 206.

6

A defect is a deviation in a basic component delivered to a purchaser for use in operating nuclear power plants if, 

on the basis of an evaluation, the deviation could create a substantial safety hazard.

7

 A basic component is a structure, system, or component that assures the integrity of the reactor coolant pressure 

boundary; the capability to shut down the reactor and maintain it in a safe shutdown condition; or the capability to 

prevent or mitigate the consequences of accidents. It is, essentially, a safety-related component.

8

 A substantial safety hazard is the loss of safety function to the extent that there is a major reduction in the degree 

of protection provided to public health and safety. Safety functions are necessary to assure the integrity of the 

reactor coolant pressure boundary, the capability to shut down the reactor and maintain it in a safe shutdown 

condition, or the capability to prevent or mitigate the consequences of accidents that could result in certain potential 

offsite exposures. 
Audit of NRC’s Implementation of 10 CFR Part 21, Reporting of Defects and Noncompliance

2

information that indicates that basic components fail to comply with 

regulatory requirements relating to substantial safety hazards or contain 

defects that could create a substantial safety hazard.

NRC revised Part 21 in 1991. Among other things, the revision was 

intended to reduce duplicative licensee reporting requirements, and allow 

for reporting of defects under NRC event reporting regulations. These 

NRC event reporting regulations are contained in Title 10, CFR, Part 

50.72 and Part 50.73 (Part 50 Sections 72/73).9 

There are differences between Part 21 and Part 50 Sections 72/73

reporting requirements. One difference is that Part 21 concerns itself with 

component defect reporting, whereas Part 50 Sections 72/73 describe

event reporting. Consequently, the thresholds for reporting a component 

defect under Part 21 are different than those for Part 50 Sections 72/73, 

as shown in Figure 1.

Figure 1: Defect Reporting vs. Event Reporting Differences

Source: Office of the Inspector General analysis of reporting requirements.

Another difference between the Part 21 defect reporting and Part 50

Sections 72/73 event reporting requirements is that Part 21 defect 

reporting requires an evaluation and report if the defect could cause a loss 

of safety function, whereas Part 50 Sections 72/73 events require 

 

9

 Title 10, CFR, Part 50.72, Immediate notification requirements for operating nuclear power reactors, describes how 

licensees must notify NRC of events and conditions and Title 10, CFR Part 50.73, Licensee event report system,

describes the type of events and conditions that must be reported to NRC in Licensee Event Reports.

Defect Reporting

(Part 21)

Could cause loss of 

safety function 

Component failure 

caused by Part 21 

defect

Event Reporting

(Part 50.72/73)

Actual loss of 

safety function 

Component failure 

due to any cause
Audit of NRC’s Implementation of 10 CFR Part 21, Reporting of Defects and Noncompliance

3

reporting of only actual losses of safety function.10 In addition, Part 21 

defect reporting requirements include individual component failures if the 

failures are caused by a defect. Part 50 Sections 72/73 would not require 

reporting of an individual component failure unless the failure caused a 

loss of safety function. Typically, safety functions are supported by

multiple redundant components—such as multiple service water pumps—

so that loss of a single component does not cause a loss of safety 

function.

To illustrate the difference, two nuclear power plants could experience the 

same basic component failure due to a defect that did not cause an event. 

Some licensees interpret this as reportable under Part 21, whereas others 

do not, since an event did not occur based on Part 50 Sections 72/73. 

However, Section 206 (which provides the statutory basis for Part 21) 

requires reporting of component defects that could cause a loss of safety 

function as well as those that did cause an actual loss of safety function. 

Part 50 Sections 72/73 only requires reporting if a failure actually caused a 

loss of safety function.

Office of Nuclear Reactor Regulation (NRR) Responsibility for 

Part 21 Implementation 

The primary NRC office responsible for Part 21 implementation among 

licensees with operating plants is NRR. Two NRR divisions are 

responsible for monitoring and enforcing Part 21-related issues:

Division of Engineering, Quality and Vendor Branch (EQVB).

 

10

 Part 50 Sections 72/73 require power reactor licensees to notify NRC of any event or condition that 

at the time of discovery could have prevented the fulfillment of the safety function of structures or 

systems that are needed to (A) shut down the reactor and maintain it in a safe shutdown condition, 

(B) remove residual heat, (C) control the release of radioactive material, or (D) mitigate the 

consequences of an accident. Furthermore, Part 50 Sections 72/73 state that events required to be 

reported under Part 50 Sections 72/73 may include one or more procedural errors; equipment 

failures; and/or discovery of design, analysis, fabrication, construction, and/or procedural 

inadequacies. However, individual component failures need not be reported under Part 50 Sections 

72/73 if redundant equipment in the same system was operable and available to perform the required 

safety function.
Audit of NRC’s Implementation of 10 CFR Part 21, Reporting of Defects and Noncompliance

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o EQVB is primarily responsible for reviewing nuclear reactor 

operating experience relevant to the quality of components 

regulated under Part 21. EQVB works closely with NRR’s 

Operating Experience Branch to identify Part 21-related issues. 

EQVB also provides oversight through inspection and allegation 

follow-up of quality assurance and Part 21 implementation for 

component manufacturers. 

Division of Inspection and Regional Support, Operating Experience

Branch.

o The Operating Experience Branch is part of an NRC coordinated 

program to systematically collect and evaluate licensee operating 

experience, identify and resolve safety issues in a timely manner, 

and apply lessons learned from operating experience to support the 

agency goal of ensuring safety. Such reviews include evaluation of

Part 50 Sections 72/73 licensee event reports (LER) for event 

occurrences that have Part 21 defective component implications.

II. PURPOSE

The audit objective was to determine if NRC's implementation of Federal 

regulations requiring reactor licensees to report defects contained in 

installed equipment is meeting the intent of the Energy Reorganization Act 

of 1974, as Amended, Section 206, Noncompliance. The report appendix 

contains information on the audit scope and methodology.
Audit of NRC’s Implementation of 10 CFR Part 21, Reporting of Defects and Noncompliance

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III. FINDING

NRC staff has initiated action to better align NRC's defect reporting

guidance with Section 206 of the Energy Reorganization Act. However, 

NRC will need to take further action so that NRC’s implementation of Part 

21 fully meets the intent of Section 206.

Section 206 requires licensees that operate nuclear power plants to notify 

NRC of defects in basic components that could cause a substantial safety 

hazard. However, NRC staff have noted Part 21 reporting issues, and 

Office of the Inspector General (OIG) analysis of industry data indicate 

that there are apparent unreported Part 21 defects. These reporting 

issues exist because NRC regulations and guidance for implementing 

Section 206 are contradictory and unclear, and the NRC Baseline 

Inspection Program does not include requirements to inspect licensee 

reporting of Part 21 defects. Unless NRC takes action to fully implement 

Section 206, the margin of safety for operating reactors could be reduced.

Despite Reporting Requirements, There Are Unreported Part 21 Defects

Despite Section 206 requirements for licensees that operate nuclear 

power plants to notify NRC of defects in basic components that could 

cause a substantial safety hazard, examples indicate that there are

defective components that should be reported under Part 21, but are not. 

Specifically, NRC headquarters and regional staff and OIG have identified 

apparent unreported Part 21 defects. Furthermore, NRC staff and 

licensees described examples of licensees’ standard practice for reporting 

defective components that may result in the under-reporting of defects 

under Part 21.

Identification of Part 21 Reporting Defects

NRC staff identified examples of apparent unreported defective 

components that could cause a substantial safety hazard as described in 

LERs under Part 50 Sections 72/73, but were not reported as Part 21 

defective components. Since mid-2009, when NRC inspectors became 

aware of potentially unreported defects during an inspection of a plant, 

agency staff have been evaluating LERs for potentially unreported defects 

under Part 21. Furthermore, NRR staff conducted an analysis of LERs 
Audit of NRC’s Implementation of 10 CFR Part 21, Reporting of Defects and Noncompliance

6

with potential Part 21 implications during the period December 2009

through September 2010, and identified 24 instances of LERs that had 

Part 21 implications but were not reported under Part 21.

OIG staff also identified examples of apparent unreported defective 

components. OIG independently analyzed LERs submitted under Part 50 

Sections 72/73 and found some describing defective components that 

could cause substantial safety hazards, but were not reported to NRC 

under Part 21. During the period June 2009 through June 2010, OIG 

identified 11 LERs that contained apparent Part 21 reportable defects

where the licensee had not indicated that it had conducted a Part 21 

evaluation or provided a Part 21 report. Given that the period of review for 

OIG’s analysis of LERs was different than the agency’s review period, OIG 

auditors requested NRR staff to review the OIG analysis results. NRR 

staff concurred that 5 of the 11 LERs that OIG identified had apparent Part 

21 reportable defects. NRR staff either did not support or could not 

determine if the remaining LERs also had potential Part 21 reportable 

defects based on the data available in the LERs.

Further, OIG reviewed three reactor control room logs recorded during the 

4th quarter of 2009. OIG’s analysis indicates that for every safety-related 

component failure that occurs and is reported, there are several that occur 

but do not meet the level of reportability using Part 50 Sections 72/73 

reporting criteria. 

OIG also calculated for each year the number of Part 21 reports filed by 

licensees since 1998. As Figure 2 indicates, there was a significant 

decline in the number of Part 21 reports after 2001. Figure 2 also 

indicates how many Part 21 reports were made through LERs according 

to Part 50 Sections 72/73 reporting criteria.
Audit of NRC’s Implementation of 10 CFR Part 21, Reporting of Defects and Noncompliance

7

Figure 2: Part 21 Reports from Nuclear Power Plants, 1998-2009

Source: OIG analysis of NRC data.

Examples of Licensee Standard Practices for Reporting 

Defective Components

During the course of the review, OIG met with agency and industry 

stakeholders to ascertain licensees’ standard practices for reporting 

defective components under Part 21. NRC staff and licensees described 

to OIG some examples of Part 21 reporting practices that indicate there 

are unreported defective components. 

NRC senior resident inspectors described licensee Part 21 reporting 

practices that indicate unreported defective components. Four of seven

senior resident inspectors interviewed by OIG described a practice 

wherein licensees (1) evaluate whether a defective component caused an 

event under 50.72 reporting criteria, but (2) fail to follow up with a Part 21 

evaluation or submit a Part 21 report when the 50.72 evaluation concludes 

that the events caused by the defective component did not reach the 

threshold for reporting under Part 50 Sections 72/73. Senior resident 

inspectors provided OIG with the following examples:

LERs that should have been reported under Part 21, but were not.

22

10

6

16

1

5 5

8

4

7 6

3

21

5

2

1

2 1

1

1

1

0

5

10

15

20

25

30

35

40

45

50

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

LERs as Part 21 Reports

Part 21 Reports
Audit of NRC’s Implementation of 10 CFR Part 21, Reporting of Defects and Noncompliance

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The licensee belief that loss of safety function was required to conduct

a Part 21 evaluation and report.11

A licensee that considers Part 50 Sections 72/73 event reporting 

evaluations to meet Part 21 defect reporting requirements, even if the 

Part 50 Sections 72/73 evaluation result is that the event is not 

reportable to NRC. 

A licensee that has opted not to conduct Part 21 evaluations or reports

because, according to the licensee, current regulations and guidance 

do not require this as long as they did an event reporting evaluation.

NRC licensees also described their Part 21 reporting practices in a 

manner that further indicated the likelihood of unreported defective 

components. Some industry representatives stated that, as standard 

practice, they do not notify NRC of Part 21 defects unless the defects are 

reportable under Part 50 Sections 72/73 event reporting regulations. 

Based on interviews and analysis, OIG determined that licensees

representing at least 28 percent of the operating reactor fleet do not, as 

standard practice, notify NRC of defects under Part 21 unless they are 

reportable under event reporting regulations.

NRC Regulations and Guidance for Implementing Section 206

Are Contradictory and Unclear 

Part 21 component defect reporting issues exist because NRC regulations 

and guidance for implementing Section 206 are contradictory and unclear.

Specifically, NRC regulations and guidance for implementing Section 206 

contain stipulations that have been interpreted as not requiring a report 

under Part 21 if an LER was not required. This interpretation seemingly 

contradicts Section 206, which requires reporting of component defects 

that could cause substantial safety hazards. Furthermore, applicable NRC 

reportability guidance is not utilized by some licensees and NRC staff, and 

NRC’s Baseline Inspection Program does not include requirements to 

inspect licensee reporting of Part 21 defects. 

 

11 As shown earlier in Figure 1, Part 21 requires reporting the defect if a failure could cause loss of safety function, 

not if it actually does.
Audit of NRC’s Implementation of 10 CFR Part 21, Reporting of Defects and Noncompliance

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NRC Regulations and Guidance Are Interpreted as Relieving 

Licensees of Defect Reporting Obligations 

NRC regulations and guidance for implementing Section 206 contain 

stipulations that some licensees and NRC staff have interpreted as 

relieving licensees of their obligation to report to NRC defects in basic 

components that could cause a substantial safety hazard. This includes 

specific language in Part 21, a 1991 Federal Register Notice that 

summarized Part 21, and NRC guidance on event reporting in NUREG1022.

The agency introduced some uncertainty regarding event reporting when it 

revised Part 21 in 1991. Part 21 Section 2(c), states:

For persons licensed to operate a nuclear 

power plant under part 50 ... of this chapter, 

evaluation of potential defects and appropriate 

reporting of defects under §§ 50.72, 50.73 ... 

satisfies each person’s evaluation, notification, 

and reporting obligation to report defects under 

this part.

Moreover, the agency has interpreted language from the July 31, 1991, 

Federal Register Notice, Statement of Consideration as guidance to 

facilitate implementation of Part 21 Section 2(c). The Statement of 

Consideration provides the following sentence which can also be seen as

contradictory to Section 206: 

If the event is determined not to be reportable 

under §50.72 or §50.73, then the obligations of 

Part 21 are met by the evaluation.

Additionally, in October 2000, NRC revised NUREG-1022, which provides 

event reporting guidelines for Part 50 Sections 72/73. This 115-page 

guidance document offers a three-paragraph subsection on Part 21, which 

states (in part):
Audit of NRC’s Implementation of 10 CFR Part 21, Reporting of Defects and Noncompliance

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The only case where a defect in a basic 

component of an operating reactor might be 

reportable under Part 21, but not under §§ 

50.72, 50.73 ... would involve parts on the 

shelf.12

This language effectively leaves NUREG-1022 in conflict with Section 206.

The combination of the changes to Part 21 and associated guidance have 

resulted in a lack of clarity for implementing Section 206. Given these 

written passages in Part 21.2(c), NUREG-1022, and the July 31, 1991, 

Statement of Consideration, some licensees have concluded that if they 

conduct evaluations consistent with event evaluation and reporting

thresholds, then they have also met Part 21’s evaluation and reporting 

requirements. Some NRC resident inspectors shared this interpretation 

as well. One resident inspector indicated to OIG that conducting a 

Part 50 Sections 72/73 evaluation and/or report fulfilled a licensee’s Part 

21 requirements. Another resident inspector asserted that Part 21 

evaluations and reporting are more the responsibility of the vendor than 

the licensee.

To resolve confusion about implementing Part 21 component defect 

reporting and to better align NRC’s defect reporting guidance with Section 

206, NRC regional office personnel sought clarification from NRC 

management officials. However, NRC management officials have 

responded that defect reporting guidance and Part 21 itself have resulted 

in multiple interpretations of Part 21 reporting requirements, which 

presents an obstacle towards clarifying Part 21 reporting.13 Consequently, 

NRC has not yet established a position that would result in consistent 

interpretation and application of Part 21 guidance and regulations on the 

part of NRC staff and resident inspectors, as well as licensees.

 

12

 Parts on the shelf refer to components that are in a nuclear power plant’s inventory that have not been installed.

13

 For example, recent inspections uncovered a potential Part 21 violation at a nuclear power plant that NRC has not 

resolved for the past 2 years.
Audit of NRC’s Implementation of 10 CFR Part 21, Reporting of Defects and Noncompliance

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Applicable Reportability Guidance Is Not Used 

Existing NRC guidance for implementation of Part 21 is applicable, but not 

all NRC staff and licensees use it. NUREG-0302, Remarks Presented 

(Questions/Answers Discussed) at Public Regional Meetings to Discuss 

Regulations (10 CFR Part 21) for Reporting of Defects and 

Noncompliance, published in July 1977, contains guidance for Part 21 

implementation and reporting. NUREG-0302 was published in 1977—

prior to the changes in 1991 that allowed reporting under Part 50 Sections 

72/73 —and, therefore, does not include guidance on reporting Part 21 

defects under Part 50 Sections 72/73. 

According to agency staff, NUREG-0302 is not frequently used by less

experienced staff because it is “35 years old,” and is composed of public 

meeting summaries. Consequently, newer staff are not as familiar with

NUREG-0302. Agency staff surmised that less experienced staff are 

more likely to use recent guidance, such as the Statement of 

Consideration, NUREG-1022, and less formal information obtained during 

training. Senior NRR staff also indicated that the question-and-answer 

format and numbering schematic in NUREG-0302 make it difficult to use. 

NRR staff agreed that the guidance in NUREG-0302 remains valid to this 

day, despite its lack of visibility to newer staff.

NRC Baseline Inspection Program Does Not Include Requirements 

To Inspect Licensee Reporting of Part 21 Defects 

The NRC Baseline Inspection Program does not include requirements to 

inspect licensee reporting of Part 21 defects.14 Currently, the NRC 

Baseline Inspection Program does not include a reference to Part 21-

related Inspection Procedures (IP). IP 36100, Inspection of 10 CFR Parts 

21 and 50.55(e) Programs for Reporting Defects and Noncompliance,

provides guidance to NRC inspectors for inspecting Part 21 reporting at 

operating nuclear power plants. Senior resident inspectors told OIG that 

they are aware of IP 36100, but there was no “hook” in the Baseline 

 

14

 The Baseline Inspection Program is an integral part of the NRC’s reactor oversight process. Its objectives are to

(1) obtain inspection information and performance indicators to assess safety performance of power reactor 

licensees, (2) determine the licensee’s ability to identify and assess risk and effectively correct issues, (3) verify 

accuracy and completeness of performance indicators, and (4) provide a mechanism for the NRC to remain 

cognizant of plant status and conditions.
Audit of NRC’s Implementation of 10 CFR Part 21, Reporting of Defects and Noncompliance

12

Inspection Program that would prompt an inspector to consider conducting 

an inspection using IP 36100.15

Incomplete Implementation of Section 206 Could Reduce the 

Margin of Safety for Operating Reactors

Incomplete implementation of Section 206 could reduce the margin of 

safety for operating nuclear power reactors as NRC may remain unaware 

of component failures that have resulted from manufacturing defects. 

Unless NRC takes further action to sufficiently implement Section 206, 

staff and stakeholders may not be notified of component defects. For 

example, given current interpretations of regulations and guidance related 

to defect reporting, a licensee might not report a basic component that 

failed due to a design defect. Other licensees that use the same 

component, as well as component manufacturers, may be unaware of the 

problem. Absent knowledge of manufacturing defects, NRC and its 

stakeholders will also not be able to trend such information. 

Additionally, NRC inspectors face difficulties in enforcing defect reporting 

given the lack of clarity in Part 21 and related guidance. As noted earlier, 

NRC inspectors have found possible Part 21 reporting violations. 

However, pending resolution of the contradictory and unclear guidance 

and regulations, the agency has opted not to cite licensees for violations 

and not issue civil penalties for licensees’ failure to notify NRC of defects 

in basic components that could cause a substantial safety hazard. 

Therefore, NRC is not fully enforcing the Part 21 regulation as required by 

Section 206. Furthermore, NRC has not levied any civil penalties or 

significant enforcement actions for nuclear power plant licensee Part 21 

defect reporting lapses in at least the past 8 years.

Recommendations

OIG recommends that the Executive Director for Operations:

1. Revise 10 CFR Part 21 for full conformity with the Energy 

Reorganization Act of 1974, As Amended, Section 206, 

Noncompliance.

 

15

 The Baseline Inspection Program does not currently include guidance for how inspectors should check for 

defective parts. NRR staff have indicated this is a condition that should be corrected. 
Audit of NRC’s Implementation of 10 CFR Part 21, Reporting of Defects and Noncompliance

13

2. Expedite publication of interim guidance that specifies requirements 

for Part 21 reporting in accordance with the Energy Reorganization 

Act of 1974, As Amended, Section 206, Noncompliance.

3. Correct the sections of NUREG-1022, Event Reporting Guidelines 

10 CFR 50.72 and 50.73, October 2000, that are in conflict with the 

Energy Reorganization Act of 1974, as Amended, Section 206, 

Noncompliance and 10 CFR Part 21.

4. Review, revise as applicable, and reissue NUREG-0302, Remarks 

Presented (Questions/Answers Discussed) at Public Regional 

Meetings to Discuss Regulations (10 CFR Part 21) for Reporting of 

Defects and Noncompliance, July 12 - 26, 1977.

5. Incorporate Inspection Procedure 36100, Inspection of 10 CFR 

Parts 21 and 10 CFR 50.55(e) Programs for Reporting Defects and 

Noncompliance into the NRC Baseline Inspection Program.
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IV. AGENCY COMMENTS

On January 19, 2011, OIG issued the discussion draft of this report to the 

Executive Director for Operations. OIG subsequently met with NRC 

management officials and staff during a February 1, 2011, exit conference 

at which time the agency requested additional time in order to provide 

informal comments. OIG met with agency management and staff on 

February 23, 2011, to discuss these comments; afterward OIG 

incorporated the informal comments into the draft report as appropriate. 

NRC staff reviewed the revised draft OIG report, found that the report will 

be helpful in adding clarity in the associated regulatory area, and opted 

not to provide formal comments.
Audit of NRC’s Implementation of 10 CFR Part 21, Reporting of Defects and Noncompliance

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Appendix

SCOPE AND METHODOLOGY

The audit objective was to assess the extent to which NRC's 

implementation of Federal regulations requiring nuclear power reactor 

licensees to report defects contained in installed equipment is meeting the 

intent of the Energy Reorganization Act of 1974, as Amended, Section 

206, Noncompliance. The audit scope was limited to NRC’s regulatory

responsibilities as they pertain to commercial nuclear power plants. To 

address the audit objective, OIG interviewed agency headquarters and

regional staff, senior resident and resident inspectors, and selected 

licensee officials. OIG also reviewed NRC regulations and guidance as 

well as LERs and Part 21 reports for the period June 2009 through June 

2010 and various inspection reports. OIG also analyzed control room logs 

for three reactor units, as well as agency-collected information pertaining 

to potentially unreported Part 21 defects.

Key documents reviewed include:

Energy Reorganization Act of 1974, as Amended, Section 206, 

Noncompliance. 

10 CFR Part 21, Reporting of Defects and Noncompliance.

NUREG-0302, Rev 1, Remarks Presented (Questions/Answers 

Discussed) at Public Regional Meetings to Discuss Regulations (10 

CFR Part 21) for Reporting of Defects and Noncompliance. 

Federal Register Notice, Vol. 56, No. 147, Statement of Consideration, 

Part 21.

NUREG-1022, Rev 2, Event Reporting Guidelines for 10 CFR 50.72 

and 50.73.

Management Directive (MD) 8.18, NRC Generic Communications 

Program.

Inspection Procedure 36100, Inspection of 10 CFR Parts 21 and 10 

CFR 50.55(e) Programs for Reporting Defects and Noncompliance. 
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Agency Office Instructions.

Agency Generic Communications.

Nuclear industry guidance documents.

Auditors conducted interviews with agency and industry employees, 

including NRC managers and staff members at headquarters and the 

regions, and members of the nuclear industry. 

We conducted this performance audit at NRC headquarters in Rockville, 

MD, from July 2010 through December 2010, in accordance with generally 

accepted Government auditing standards. Those standards require that 

the audit is planned and performed with the objective of obtaining

sufficient, appropriate evidence to provide a reasonable basis for any 

findings and conclusions based on the stated audit objective. OIG 

believes that the evidence obtained provides a reasonable basis for the 

report findings and conclusions based on the audit objectives. Internal 

controls related to the audit objective were reviewed and analyzed. 

Throughout the audit, auditors were aware of the possibility or existence of 

fraud, waste, or misuse in the program. 

Major contributors to this report were R.K. Wild, Team Leader; Kevin 

Nietmann, Senior Technical Advisor; Vicki Foster, Audit Manager; 

Timothy Wilson, Senior Management Analyst; and Diane Furstenau, 

Student Management Analyst.